Cities around the world are cracking down on foreign real estate investors, but don't expect NYC to follow suit

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As prices spiral ever upward in major cities across the globe, attention has turned toward foreign buyers and investors, many of whom, it's argued, buy up properties simply as a handy investment for stashing cash, leaving them to sit empty while regular residents struggle to find a place to live.

And in the case of a flat-out tax on foreigners buying in the U.S., there's good reason for this: Such a rule would violate the Fair Housing Act, which protects buyers and renters from housing discrimination based on nationality. "The bottom line is that there's no limitation on anyone buying in the U.S. You don’t have to be a citizen," says real estate attorney Neil Garfinkel. "So the idea of focusing specifically on the foreign buyers is not in line with our fair housing laws."

As for a potential tax on vacant apartments, that could get complicated, too. "As a weapon of public policy, the property tax is more of a blunderbuss than a scalpel. It's hard to refine to get it to do what you want to do," says urban planner Julia Vitullo-Martin, noting the potential for unintended consequences like lowered city tax revenue, or driving away the "highly skilled foreign workers" New York works to attract in addition to the international pied-a-terre buyers it's looking to dissuade. "So efforts to use property taxes to manipulate the real estate market, in my opinion, are almost never a good idea."

One potential issue in New York? How to define an apartment as "under-utilized," and therefore subject to a vacancy tax. "This gets you into a whole new set of issues—is the 85-year-old widow living in her Park Avenue four-bedroom 'under-utilizing' her apartment?" asks Vitullo-Martin.

Unlike taxes on so-called "zombie houses" or abandoned properties, "with this kind of vacancy tax you'd be focusing on who owns the property, rather than its condition, and whether or not it's dangerous. It's completely different," notes Garfinkel. "We're so highly taxed to begin with, that I don't know that [the city] wants to discourage people from purchasing any more than they already are, and I haven't seen any proposals [to create new taxes]. I'm not sure that that would be such a great idea."

Vitullo-Martin concurs: "The focus first should be on equalizing what people pay in property taxes, which are disproportionately favorable for single-family home owners. It's much better to fix our current property taxes, before you start using them to manipulate the market."

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